Simplistically the business model is a description how company is doing business. Business model framework can be defined based on three components, the value proposition, the value creation and delivery system, and value capture. The value proposition is describing what the company is offering to its customers and why the customers are ready to pay for it. The value creation and delivery system are explaining how and why the company is developing and delivering value to its customers. The value capturing defines how the company is regenerating revenue and profit (Doganova & Eyquem-Renault, 2009). Well-thought business model is considered to give defined and organized overall picture of the company and its operations. This is seen to help companies to execute the strategy (Richardson, 2008). From the design perspective, these three elements can be described as desirable, feasible and viable. Desirability is describing how desirable the value proposition is to the target users and investors. Feasibility is clarifying ways to organize the needed activities and resources to create and deliver value. Viability is declaring how the business model can regenerate revenue to sustain the value creation and delivery process. Konietzko et al. (2020a) have used these above-mentioned properties in their research work related to experimentation, as the elements can be tested and are thus suitable for research purposes (Konietzko et al., 2020a).
CBM is described to be a sustainable business model which includes both environmental and economic value creation. Business logic is shifted from traditional one-time sales of goods to generating profit from iterative flow of reused product and materials over time.
Thus, the product value is aimed to keep as high as possible by slowing and closing the resource loops (Guldmann & Huulgaard, 2020). CBMs are argued to differ from conventional ones by needing more than one model (plural) to create value for business and the stakeholders (Pedersen, Earley & Andersen, 2019). Pedersen et al. (2019) have argued organizations struggle to create economically viable models. Virgin material prices being low and the inability to acknowledge the CE products’ recycling value are seen currently to be the main barriers for the CBMs to work.
Although the importance of circular business models has been acknowledged, the existing literature is known to lack clarity of the theoretical conceptualisation and position in economic and operation literature (Geissdoerfer et al. 2020). Research field has been seen presenting slightly differing definitions for circular business models. Frishammar and Parida (2019, 8) have defined the circular business model based on prior literature emphasizing the partnership aspect:
“…one in which a focal company, together with partners, uses innovation to create, capture, and deliver value to improve resource efficiency by
extending the lifespan of products and parts, thereby realizing environmental, social, and economic benefits.”
Whereas Geissdoerfer et al. (2020, 7) (Figure 2) have defined the circular business model based on the existing literature stressing the usage of resources:
“…business models which are cycling extending, intensifying, and/or dematerializing material and energy loops to reduce the resource inputs
into and the waste and the emission leakage out of an organizational system. This comprises recycling measures (cycling), use phase extensions (extending), a more intense use phase (intensifying), and the substitution of
products by service and software solutions (dematerializing).”
Figure 2. The Circular economy (Geissdoerfer et al., 2020, 4).
To differentiate the linear from CE models, literature has utilized three different designs and business model strategies to describe the cycle of the resources: the slowing, closing, and narrowing resource loops (Figure 3). Slowing and narrowing loops aim both for resource reductions but whereas slowing flow is slowing the recycling of the resources, narrowing flow accepts the natural speed of flow. Narrowing flow is not including service loops, thus not seen as part of cycling systems. Closing loop tends to reuse the material through recycle (Bockent et al. 2016).
Figure 3. Categorization of resource use by narrowing and closing the loop (Bocken et al., 2016, 309).
Design strategies for slowing the resource flow are extending the utilization period of the product, helping to reduce the need of resource usage. By designing long-life products, the organization pays attention to the durability, reliability, and timelessness of the products.
The other major design aspect is the product life extension. By designing product life extension, the organization takes notice on factors such as the maintenance, repairment, upgradability and standardization. The closed cycle is utilizing three different product design perspectives: biological cycle, technological cycle and design for disassembly and reassembly. Biological cycle products are designed for consumption and biodegrade to start a new cycle. Technical cycle is creating products which are recycling the materials for new products repeatedly, avoiding material flow through downcycling. Design for disassembly and reassembly is combining both technical and biological cycles to reassemble and recycle parts for another cycles (Bocken et al., 2016).
Bocken et al. (2016) have identified 4 CBM strategies for slowing and 2 for closing the loop based on prior research: The access and performance, extending product value, classic long-life model, and sufficiency models which are described to be slowing the loop, and the extending resource value and industrial symbiosis models which are closing the loop.
Based on Bocken et al.’s (2016) and Geissdoerfers et al.’s (2018) prior research,
Geissdoerfer et al. (2020) have compressed the finding into four generic strategies for CBM: cycling, extending, intensifying, and dematerializing. Cycling means the reused, remanufactured, refurbished, and recycled materials and energy. It is extending the resource lifecycle as limiting the energy intake and waste output through technical cycle and is seen to be suitable for product-service systems. From the value proposition point of view the most important element is take-backs which needs collaboration in value chain and reverse manufacturing processes. Value is captured as the resources are turned into new forms of value, minimizing material acquisition costs, and creating additional revenues from the final products. Value is created and deliver through take-back systems and collaboration. Extending resource loops means ways to extend the product usage phase through design process. It aims for reducing the need for new product production. Value proposition is earned thought long-life products. The value is created and deliver by created services around the lifecycle of the product which are often related to long customer relationships (Geissdoerfer et al., 2020).
Intensifying means extending use phase of the product by utilizing share platforms as the value proposition. The strategy can lengthen the lifetime of the product through regular maintenance and updates of the products. Value is created by long lasting customer relationships and servitization. The environmental benefit is reducing waste and new product acquisitions. Dematerialization refers to product-service systems, product utility without ownership of the product through service and software solutions. Value is captured and delivered through slow and close loop capabilities and collaboration. The key elements for the value capturing are regular revenue streams, increased profit margins and new pricing mechanisms (Geissdoerfer et al., 2020). Internet of Things (IoT), remote locating and operating systems, is recognised to be supporting the servitization related CBMs’ by improving in-use and post-use products tracking as well as helping to monitor the maintenance needs or remaining lifetime of products. Companies are known to be currently facing implementation problems of Iot due the data management and adaptability problems considering the fast development phase of Iot technology (Ingemarsdotter, Jamsin &
Balkenende, 2020).
Pedersen et al. (2019) have argued talking about CBM being misleading, as the CE solutions often demand collaboration between multiple parties with interconnected business models. They suggest future research to give more emphasis on different variations of business models in order to bring the CE more present. Geissdoerfer et al.
(2020) have highlighted in their research the nascent approach of ecosystem view in multi-stakeholder and network cases. Networks are generally considered to be more member stable and risky in literature. Networking is loose connection between the organizations to change information between the parties and described as a cooperation. Members can come and go without disturbing the linkages between the participants. Networks describe closer connection with more formal relationship and tend to have mutual goals and planning, thus comparable to coordination relationships. Network structures are often created by old competitors who joint their functions and goals. It relies strongly on its members and can be comparable with collaboration relationship (Brown & Keast, 2003). As multiple stakeholders join their forces as multi-business view, it leads to a value network. As value network and business model portfolio perspectives are combined, it can be described with ecosystem view. Ecosystem view can be seen to combine multi-stakeholder views into multi-business models. It could go beyond the regular corporate strategy thinking combined with industry analysis elements to collaborative and under investigated competitive elements (Geissdoerfer et al., 2020). Prior literature is not providing information how CBMs are experimented in collaboration based on the conducted literature review. With this study, I want to extend the understanding of how CBMs can be co-experimented and what is the value delivered to the participants as more in-depth understanding of the topic is acknowledged to be needed (Bocken & Antikainen, 2018).